Italy and France last month dashed hopes for a December deal, saying they were not ready to support it until farmer fears of an influx of cheap commodities from Mercosur, such as beef and sugar, were resolved.

All 27 EU agriculture ministers have been invited to the meeting at the Commission, the EU presidency holder Cyprus said on Tuesday, although it was not clear yet how many would attend.

Farmers looking for reassurances

European commissioners for agriculture, trade and health are expected to give reassurances over future funding for farmers under the EU’s Common Agricultural Policy, including a 6.3 billion euro (C$10.2 billion) crisis fund in the next EU budget.

The Commission’s move to merge regional cohesion funds and CAP money in the next seven-year budget alarmed farming nations.

In a letter to Cyprus’s president and the head of the European Parliament on Tuesday, Commission President Ursula von der Leyen proposed accelerating 45 billion euros of support to farmers and reiterated that the 2028-2034 budget would guarantee them 293.7 billion euros.

The Commission will also review import controls, including permissible maximum levels of pesticide residues, two EU diplomats said.

“It is a critical moment to discuss demands from farmers,” one of the diplomats said.

Wooing EU members for support

The EU executive, supported by EU-Mercosur proponents such as Germany and Spain, is seeking to garner the broad majority of 15 EU members representing 65 per cent of the EU population required to authorize the EU signature, possibly as early as January 12.

They say the accord, which has been 25 years in the making and would be the EU’s largest in terms of tariff reductions, is vital to boosting exports hit by U.S. import taxes and to reduce reliance on China by securing access to critical minerals.

With Poland and Hungary opposed to the deal and France critical, the position of Italy will be a key determinant of whether the deal can be signed. A vote is expected on Friday.

The Commission had held discussions with member states over the past two weeks and the bloc was on track to sign the agreement soon, a spokesperson for the executive said.

Italy is not opposed to the deal, two Italian sources told Reuters on Tuesday, but wanted assurances – notably on reciprocity – so that imported farm products meet EU health and environmental standards. These were due to be discussed on Wednesday.

A second EU diplomat said Italy was not yet fully on board.

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The EU and Canada have benefited from a free trade agreement since 2017, which has boosted bilateral trade by 65 per cent, and set up a raw materials partnership in 2021.

Ng met EU trade chief Maros Sefcovic for a lunch on Saturday following a meeting with Ngozi Okonjo-Iweala, the director general of the World Trade Organization in Geneva on Friday.

“Trade agreements are one thing, and we have seen really great numbers, but what more can we be doing to help Canadian businesses enter into any of the 27 member states…and what more can we do to the same in Canada” Ng said.

She said critical minerals and smaller businesses would be among the focus areas with the EU. The EU, in particular, is keen to forge partnerships to secure metals that are key for the energy transition – cobalt, lithium and nickel – to reduce its dependence on China.

Canada is also pushing to diversify its exports and set itself a target in 2018 of increasing non-U.S. exports by 50 per cent by 2025. Ng said the country was on track to meet or exceed the target.

Canada struck trade deals with Indonesia in December and Ecuador last week and is pushing hard in the Indo-Pacific region. The minister is leading a delegation including more than 200 businesses to Australia, Singapore and Brunei next week.

“We are at the table with the countries in Southeast Asia, so the Association of Southeast Asian Nations. I took a very large delegation of Canadian businesses to the Philippines in December, to Indonesia, to markets like Vietnam, Malaysia, Japan, Korea,” Ng added.

Ottawa threatened retaliatory duties and legal action against the United States after President Donald Trump announced tariffs on Canada and Mexico a week ago and before he paused their imposition for 30 days. Ng said Canada could challenge Washington at the WTO if tariffs were imposed.

“We would consider all of the options are available to Canada because Canada is a country that believes in a rules-based trading system,” Ng said.

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Deforestation is the second largest source of the greenhouse gas emissions that cause climate change after the burning of fossil fuels, according to the European Commission. The EU had planned to ban the import of commodities from suppliers unable to prove their goods were not linked to deforestation.

The EU Deforestation Regulation (EUDR) would have impacted imports of cocoa, coffee, cattle, soy, oil palm, timber, rubber and related products like chocolate and leather.

It was scheduled to come into effect on Dec. 30, but last week the EU Commission proposed a 12-month delay, under pressure from industries and governments who said it would cause supply chain disruptions, exclude poor, small-scale farmers from the EU market, and drive up the cost of basic foodstuffs because many farmers and suppliers were not ready to comply.

The EU’s vegoil and oilmeal group Fediol said its members – which include trading giants such as Cargill and food processors like AAK – will suffer losses from a delay after paying premiums to secure raw materials that comply with the law.

“It’s a financial loss they are making by having been ready on time,” Fediol director general Nathalie Lecocq told Reuters.

Cocoa processors and chocolate makers face the same scenario with traders saying they had sold deforestation free beans to them at a premium of up to six per cent, amounting up to 300 pounds a ton.

The premium will now likely fall to zero as consumers won’t be willing to pay more for cocoa that complies with a law that has been pushed back.

That will leave the processors and chocolate-makers unable to pass on the cost and forced to absorb it.

“There’s real world implications to this. Whoever agreed to buy and pay that premium paid for nothing,” said a Europe-based cocoa trader.

Research published last month by Fefac, an EU animal feed industry body, estimated that EUDR compliant soybeans would cost five to ten per cent above regular beans.

Fefac, EU farmers lobby Copa-Cogeca, and various other EUDR-impacted industries welcomed the delay proposal, having previously warned that implementing the rules on time would result in many small businesses suffering.

The EUDR will require importers of commodities to prove their goods weren’t grown on land deforested anywhere in the world, or face fines of up to 20 per cent of their turnover.

The law requires companies map and trace their supply chains down to the plot where their raw materials were grown.

Critics said the measure is too complex as supply chains involve millions of farms and multiple intermediaries whose data is often difficult to obtain or verify.

The Commission’s delay proposal still needs to be approved by the European Parliament and member states.

The majority of members asked Brussels in March to scale back and possibly suspend the law while parliament members who oppose the delay do not have a majority.

The Commission said the vote would likely happen in November or December at the latest.

— Additional reporting for Reuters by Gus Trompiz

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The deal secures up to 665,000 doses from vaccine manufacturer CSL Seqirus and includes an option for a further 40 million vaccines for a maximum of four years. The vaccines will be jointly procured by the Commission’s emergency health arm HERA and 15 countries in the EU and the European Economic Area.

The doses are intended for those most exposed to the virus, such as poultry farm workers and veterinarians. The United States, Canada and Britain are also in the process of securing preventative vaccine doses.

“When it comes to avian influenza we are continuously and actively monitoring the situation…and tomorrow, with our Member States, we are ensuring access to over 40 million doses of avian influenza vaccine to protect those most exposed. Deliveries to countries that have immediate needs are already on their way,” EU health commissioner Stella Kyriakides told Reuters.

The H5N1 virus has spread across most of the U.S. states affecting primarily poultry and in recent months over 80 dairy farms.

So far, there have been no confirmed human-to-human transfers though three people in the U.S. were infected after exposure to infected cattle since April 1.

There are no active cases in humans or in cattle in the EU, as of early June according to the European Centre for Disease Prevention and Control (ECDC).

“Transmission to humans remains a rare event and no sustained transmission between humans has been observed so far,” the ECDC said in a weekly report for June 1-7.

“The risk of zoonotic influenza transmission to the general public in EU/EEA countries is considered to be low.”

The Commission, through HERA, has already secured 111 million doses from GSK and Seqirus of pandemic influenza vaccines, which can be adapted to any prevailing flu strain.

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Poland, Slovakia and Hungary announced restrictions on imports on Friday after the European Commission decided not to extend a ban on sales into Ukraine’s five EU neighbours, which also include Romania and Bulgaria.

Ukraine retaliated by filing complaints Monday with the World Trade Organization (WTO) against Poland, Slovakia and Hungary, while other EU members condemned the unilateral moves.

Spain’s agriculture minister on Monday said the bans seemed illegal while his French counterpart said they called European solidarity into question.

Poland, with a parliamentary election looming in October, distanced itself even further and withdrew from a co-ordination platform — a group including the five neighbours, Ukraine and the European Commission — that has been looking at solutions to boost Ukraine grain transit to global markets.

“We have to look forward, since Ukraine said it wants to sue Poland… every comment we would have made on this platform could be used against us,” Poland Agriculture Minister Robert Telus told reporters in Brussels.

For much of the last year, some 60 per cent of Ukrainian grain has transited through the five EU countries using so-called Solidarity Lanes as an alternative to the Black Sea due to Russian threats.

Like most countries in central and eastern Europe, Poland and Slovakia have been some of Kyiv’s strongest allies in its fight against Russia’s invasion that began in February 2022. Hungary’s stance has been more ambivalent, as the only member of the EU and NATO alliance to maintain close relations with Moscow, still the main source of its oil and natural gas.

But grain exports have been an area of friction throughout the region.

Exports disrupted

Ukraine’s war with Russia has disrupted its ability to export agricultural products through its Black Sea ports, leading to a surge in shipments via road, rail and barge through its five EU neighbours.

Farmers in those countries protested these shipments were distorting local markets, leading the EU to approve trade restrictions — while still allowing transit — until Sept. 15.

Spain’s agriculture minister Luis Planas Puchades said it was up to the European Commission to judge whether the unilateral bans have broken any laws, but said the measures seemed illegal.

France’s agriculture minister, Marc Fesneau, was also critical of the measures.

“For solidarity there needs to be unity… We must keep hold of the two elements, otherwise the European project is at risk. The single market is a fundamental element,” he said.

Romanian Prime Minister Marcel Ciolacu said on Monday his country would look to extend a trade ban on Ukrainian grain for 30 days if import requests rise.

Ciolacu said Romania had not seen requests to import grain from Ukraine since Friday and did not want a repeat of the situation earlier this year that impacted Romanian farmers.

“The Ukrainian prime minister promised to send the export licensing proposal today, which we will discuss,” Ciolacu said.

“If there will be export requests to Romania I will ask the agriculture and economy ministers to draft an order extending the ban for a period of 30 days until things are clarified.”

The Bulgarian parliament voted to lift its ban on Ukrainian grains last week.

— Reporting for Reuters by Julia Payne in Brussels and Yuliia Dysa in Kyiv; additional reporting by Luiza Illie in Bucharest, Tom Balmforth and Pavel Polityuk in Kyiv, Sybille de La Hamaide in Paris, and Marek Strzelecki; writing by Nigel Hunt.

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Restrictions imposed by the European Union in May allowed Poland, Bulgaria, Hungary, Romania and Slovakia to ban domestic sales of Ukrainian wheat, maize, rapeseed and sunflower seeds, while permitting transit of such cargoes for export elsewhere.

“We will extend this ban despite their disagreement, despite the European Commission’s disagreement,” Polish PM Mateusz Morawiecki told a rally in the northeastern town of Elk. “We will do it because it is in the interest of the Polish farmer.”

Polish development minister Waldemar Buda said in a post on social media platform X, formerly known as Twitter, that he had signed the Polish ban regulation, which would run for an indefinite period of time from midnight.

Hungary imposed a national import ban on 24 Ukrainian agricultural products, including grains, vegetables, several meat products and honey, according to a government decree published on Friday.

Slovakia’s agriculture minister followed suit announcing its own grain ban. All three bans only apply to domestic imports and do not affect transit to onward markets.

EU plea

EU Trade Commissioner Valdis Dombrovskis said on Friday countries should refrain from unilateral measures against imports of Ukrainian grain. Ukraine’s President Volodymyr Zelenskiy said it would respond in a “civilized fashion” if EU members break the rules.

The EU created alternative land routes, so-called Solidarity Lanes, for Ukraine to use to export its grains and oilseeds after Russia, which invaded in 2022, backed out of a U.N.-brokered Black Sea grain deal in July that allowed safe passage for the cargo ships.

The EU Commission said existing measures would expire as originally planned on Friday after Ukraine agreed to introduce any legal measures (including, for example, an export licensing system) within 30 days to avoid grain surges.

“It has concluded that thanks to the work of the Coordination Platform and to the temporary measures introduced on 2 May 2023, the market distortions in the five Member States bordering Ukraine have disappeared,” the European Commission said in a statement.

The EU said it will refrain from imposing any restrictions as long as the effective measures by Ukraine are in place and fully working.

Product glut

Farmers in the five countries neighbouring Ukraine have repeatedly complained about a product glut hitting their domestic prices and pushing them toward bankruptcy.

The countries, except Bulgaria, had been pushing for an extension of the ban passed its Sept. 15 expiry.

Poland, Hungary and Slovakia previously said they may extend the restrictions unilaterally while Bulgaria on Thursday voted to scrap the curbs.

Romania’s government, which unlike its peers did not unilaterally enforce a ban before May, said on Friday it “regretted that a European solution to extend the ban could not be found.”

It added it was waiting for Ukraine to present its action plan of measures to prevent an import surge by Sept. 18 before deciding how to protect Romanian farmers.

Romania sees over 60 per cent of the alternate flows pass through its territory mainly via the Danube river and its farmers have threatened protests if the ban is not extended.

For the last year, Ukraine had been moving 60 per cent of its exports through the Solidarity Lanes and 40 per cent via the Black Sea thanks to the deal.

In August, about four million tonnes of Ukraine grains passed through the Solidarity Lanes of which close to 2.7 million tonnes were through the Danube. The Commission wants to increase exports through Romania further but the plan has been complicated by Russian drone attacks on Ukraine’s grain infrastructure along the Danube and near the Romanian border.

— Reporting for Reuters by Julia Payne and Alan Charlish; additional reporting by Jan Lopatka in Prague and Karol Badohal in Warsaw, Boldizsar Gyori and Krisztina Than in Budapest; and Luiza Ilie in Bucharest; writing by Nina Chestney.

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Ukraine has become entirely dependent on alternative European Union routes, called Solidarity Lanes, for its grain exports after Russia abandoned in July a year-long deal that had allowed Ukrainian grains to be shipped safely via its Black Sea ports.

As a result, farmers in neighbouring states — Poland, Hungary, Romania, Bulgaria and Slovakia — have faced increased competition and bottlenecks in their own markets.

The European Commission announced “temporary preventive measures” in May that would ban sales into these five states while allowing transit to non-EU markets, mainly Africa.

“The preventive measures were effective, efficient and stabilizing the markets in the five member states and also helped increase exports via Solidarity Lanes,” Agriculture commissioner Janusz Wojciechowski told the European Parliament.

“This is the main argument for prolongation of the preventive measures which is my strong position.”

He added that the Commission was closely monitoring the situation. The Commission also allocated 156 million euro (C$227 million) in compensation to the affected EU farmers and amassed nearly 1.9 billion euro (C$2.77 billion) to improve the alternative routes.

The five countries have been pushing for an extension of the ban past its Friday expiry and Poland has repeatedly said it will unilaterally continue with the ban if the Commission does not extend it.

Over 60 per cent of the Ukrainian grain transiting the EU moves through Romania where its farmers’ associations have said they plan protests should the ban was lifted.

Romania’s agriculture minister, Florin Barbu, suggested the European Commission to set up a subsidy system for transiting Ukrainian agricultural products outside the bloc.

“The restrictive measures have had a positive effect both for the Romanian grain market and for the transit of Ukrainian grain, which is rising,” Barbu said in a statement on Tuesday after meeting his Hungarian counterpart in capital Bucharest.

— Reporting for Reuters by Julia Payne in Brussels and Luiza Ilie in Bucharest.

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Solidarity lanes are rail and road transport connections through EU member states that border Ukraine such as Poland and Hungary while the most significant lane is through Romania.

Wojciechowski said that the EU was looking at several initiatives from member states to come up with a joint plan to cover the additional transport costs.

The Black Sea deal, brokered by the United Nations and Turkey last July, aimed to help prevent a global food crisis by allowing grain blocked by the war in Ukraine to be safely exported. Russia pulled out last week.

“Trade is not attractive enough…Russia will be a beneficiary of this situation because it will be cheaper to buy grain from Russia than Ukraine that is transported through Poland to the Baltic ports,” Wojciechowski said, without providing a cost estimate.

About 60 per cent of Ukraine’s exports were shipped via solidarity lanes and 40 per cent went via the Black Sea while the U.N. backed grain deal was in operation.

The collapse of the deal is expected to take a particularly heavy toll on countries in Africa that depended on deliveries by sea.

“It is not the first time Russia (has used) food as a weapon… The situation is similar to the beginning of the war,” Wojciechowski told reporters.

“We are ready to export almost everything. This is about four million tonnes per month of oilseeds and grains and we achieved this volume in November last year,” he added.

Expanding grain transit through the EU is sensitive for Poland and some other EU countries bordering Ukraine, where farmers have come under pressure from increased Ukrainian imports.

In May, the EU allowed five countries close to Ukraine – Bulgaria, Hungary, Poland, Romania and Slovakia – to ban domestic sales of Ukrainian wheat, maize and oilseeds while allowing transit through them for onward export.

The EU will review the ban after several countries pushed for extension beyond the Sept. 15 ban expiry.

“Now Ukraine has built up stocks again, more than before the war, and most likely this will increase pressure on frontline countries and we have to approach this seriously,” the Commissioner added.

EU member Lithuania has asked the European Commission to develop a route for Ukrainian grain through the ports in the Baltic states of Estonia, Latvia and Lithuania.

The move, proposed by three Lithuanian ministers in a letter seen by Reuters, would create “a viable and trusted alternative route” for exporting Ukrainian produce, including grain, through the ports of Tallinn, Riga, Ventspils, Liepaja and Klaipeda, said the letter, signed by three Lithuanian ministers.

The five ports have a combined grain export capacity of 25 million tonnes, said the letter, dated July 21.

Its asked the European Commission for targeted action to create the route, such as “implementing measures to facilitate cargo handling between different railway gauges”, and moving customs and other controls of the produce from the Polish border to the Baltic ports.

Ukraine and the Baltic States railways are built on Russian-type gauge, which is incompatible with the railway gauge used in Poland, the only practical route between the countries.

–Reporting for Reuters by Julia Payne and Geert De Clercq. Additional reporting by Andrius Sytas in Vilnius.

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